Unforeseen events such as losing jobs, medical emergencies or sudden death of a wage earner can put your clients’ life and their families in deep trouble. As their financial advisor, your role is not only to make sure that their goals are achieved; but also to prepare them for any kind of crisis so that they don’t have to dip into their existing investments.
Having sufficient life insurance must form a vital part of the contingency plan developed for your clients. It will provide financial security in case of any adverse situations. The cover should be sufficient to take care of long-term liabilities such as home loans.
When it comes to handling medical emergencies, the one and only solution is to ask your clients to take health insurance, considering the increasing healthcare expenses. For example, if your client has just started working, you can suggest an individual cover of Rs. 5 lakh and upgrade the cover as income increases. Moreover, they can also purchase a higher cover by combining top-up policies which is cost-effective.
Financial experts must make certain that their clients maintain an emergency fund. This reserve should have enough funds to manage 6 months to a year’s expenses. Keep in mind that you have to review your client’s emergency fund on a periodic basis if there is a rise in earnings or the number of dependants has increased. Moreover, if the client has used some amount of the fund, it has to be replenished soon.
A bank flexi fixed deposit will give your clients immediate access to money through the premature withdrawal option. Explain to clients that opening a flexi FD is better than keeping funds in a savings bank account especially in the event of a crisis. Advisors can also recommend opening separate FDs of different durations to get maximum benefit.